Auditor-general Shauket Fakie has warned the defence department that it faces a qualified audit report if it fails to account properly for a R3,57m donation from Holland used to cover expenses during the 2001 Mozambique floods.

Parliament's public accounts committee yesterday questioned senior defence officials, including defence secretary January Masilela, about several issues, including foreign aid received.

There was no supporting documentation for audit purposes relating to the spending of the R3,57m donation, African National Congress MP PierreJeanne Gerber said. In his reply, the department's chief financial officer, Jack Grundling, drew a distinction between donations in cash and in kind. There was no policy or system in place for donations in kind such as offers of training and equipment.

It was hoped one would be in place by the end of June, Grundling said. As far as cash donations were concerned, up until the 2001 Mozambique floods the department had never had any of its activities funded by donors, Grundling said.

He said none of the funds had come directly to the department, but had been deposited in the Reconstruction and Development Programme Fund, and this could be accounted for.

With acknowledgements to Sapa, Andela Quintal and Business Day.